According to official figures yesterday, the government had amassed total debt of £697.5bn, or 47.5% of GDP, by the end of 2008.

That includes just over £100bn for "financial sector interventions" - mainly the nationalisation of Northern Rock last spring, and the recapitalisation of Royal Bank of Scotland.

Without the cost of the bank bail-outs, the public debt by the end of the year was a marginally less alarming £594bn, or 40.4%, but that still breaches the 40% ceiling Gordon Brown set under his "sustainable investment rule", when he first came to power - and it is set to surge to more than £1tn by 2012.

How does that compare with other leading economies?

The UK came 18th of 28 in the debt table of members of the Organisation of Economic Co-operation and Development club of rich countries in 2007, with its debts worth 30.4% of GDP on the OECD's measure. The US came lower, with debt worth 43.8% of GDP, while Greece's debt amounted to 68.6%, and Japan's to 85.9%, for example.

Britain's position is deteriorating quite rapidly. Alistair Darling forecast in his autumn pre-budget report that as the recession takes its toll on tax revenues, and taking into account the cost of the government's fiscal stimulus package, debt levels will eventually peak at 57.4% in 2012-13.

On the basis of last year's figures, that would make it the fourth worst in the OECD; though with almost every major economy in the world either already in recession or well on the way, public finances are likely to get rapidly worse everywhere.

Barack Obama's economic adviser Paul Volcker said yesterday that he thought the new White House administration would have to throw "several trillion dollars" at the economic crisis before it was over.

How much debt is too much?

In itself, a debt-to-GDP ratio of 60% need not be a problem. GDP is a bit like a measure of annual income for countries - and homeowners regularly expect to borrow 300% to 350% of their income over a 25-year period, without running into trouble.

And repayments are starting from a relatively low base: the government was paying 4.5% of GDP in interest in 1986, but that had slipped to about 2% by last year. Economists say Brown's 40% ceiling was fairly arbitrary - but in general, economies with higher government debt levels tend to face higher interest rates in the long term; and there is a risk of "crowding out": the government mops up billions of pounds of capital that might have been put to better use in the private sector.

Will we now have to add all the banks' liabilities to the government's debt?

Royal Bank of Scotland's debts will soon have to appear on the government's books, because the Office for National Statistics (ONS) judges that the government has enough managerial control over the bank to make it a public body.

Statisticians have not yet decided on a figure for RBS's liabilities to include in the accounts, but any number they come up with is likely to be eye-watering: market estimates suggest £1.7tn.

It is potentially misleading simply to add that figure to the public debt, however, because national accounts conventions mean many of the relevant assets - the homes against which mortgages are secured, for example - will not be added to the government's balance sheet.

What about Alistair Darling's latest bank rescue package?

The ONS has not yet had a chance to add up the cost of the Treasury's new scheme for insuring potentially "toxic" debts at the banks, and Darling himself would not put a figure on it, but the eventual cost to the government will depend on how many of the loans go sour as the economy deteriorates: presumably, far from all of them.

Are we at risk of "going bankrupt"?

It's an extremely remote possibility. Foreign investors currently fund about 35% of the government's total debts. There is little sign yet of them losing their appetite for government bonds, or gilts: the German government has had more problems selling its debts at recent auctions than the UK. However, if foreign investors do go off gilts, then yields will be driven up - so, in effect, taxpayers will end up paying higher interest rates to borrow money.

However, there is huge and growing demand for the government's debt from domestic investors such as pension funds, which can match the fixed returns offered by gilts against their liabilities.

At the same time, in a downturn, there is also usually a sharp rise in the "savings ratio" - the proportion of income that consumers put away for a rainy day. Much of this extra cash is likely to find its way into government bonds. So if overseas investors lose confidence in the UK, we will have to fund the debts ourselves - borrowing from our own future income, in effect.

That could prolong the downturn, and force the Bank of England to keep interest rates lower, and for longer, than it otherwise might have done, to compensate for the tightening of fiscal policy; but it doesn't mean we're "bust".

What can policymakers do next?

Mervyn King, governor of the Bank of England, has made it clear that he is already preparing a fresh onslaught on the economic downturn.

When interest rates get close to zero, from their current record low of 1.5%, the Bank is ready to move on to "quantitative easing".

This is the radical approach of buying government bonds and other assets, in an effort to drive bond yields down, and release cash into banks, which should then lend it to families and firms across the economy.

The approach was used by the Japanese government from 2001, as it battled to drag the economy out of a "lost decade" of deflation and recession.

When the economy recovers, the Bank would hope to sell the gilts back on to the open markets, taking cash back out of the economy. In the US, the Federal Reserve has already bought billions of dollars worth of assets in an effort to keep credit flowing.

But wasn't the problem in the first place that we were borrowing too much? Isn't throwing open the credit taps waving temptation in our faces?

In a way, yes, but policymakers face a tough dilemma: they must balance the long-term risks of a rising debt burden, against the short-term threat of a deep depression. Neither is an appealing prospect, but the UK has taken a similar approach to the US, which is also accepting rapidly rising deficits as the price of avoiding a much worse outcome.

We will need to lower our borrowing in the long term but abruptly starving the economy of credit overnight could be devastating.

As King put it on Tuesday night: "This is the paradox of policy at present - almost any policy measure that is desirable now appears diametrically opposite to the direction in which we need to go in the long term."